Wednesday, December 13, 2017

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SUMMARY OF ISSUES AFFECTING NONPROFIT ORGANIZATIONS As of April 30, 2017Richard W. Meyer, Attorney at Law

May, 2017

Legislators race to the finish of session:

With four weeks remaining in the 85th regular session, legislators are scrambling to get bills passed in their house and quickly referred to a friendly committee in the other house for quick action. There are now more than 7,000 bills and resolutions on file, depending on how you count them. Bills that passed one house but are not moving this week in the other house are likely dead “by the clock” for this session, unless the legislator is skillful in attaching the key elements of a short bill onto a compatible bill that is moving through the process and to final passage.

Watching committees: The bill text you may be reading at any point in time may only be a glimpse of what develops, whether shorter or longer, and bearing changed content or other surprises. Committee substitute bills in the house of origin are common and often surface unexpectedly. When following a committee’s actions, be sure you know whether they are talking about the bill as filed or one or more substitute bills that may be in play at that time. Floor amendments are common in the House for controversial or disputed bills.

House and Senate daily calendars: Watch for a bill’s appearance on the various House or Senate intent calendars for a given date. As the lists for each day’s calendar get longer, there is less chance a bill will be called that day or ever.

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Access the text of any proposed House bill (HB) or Senate bill (SB) at www.capitol.state.tx.us and use other tracking and analysis tools available on the state’s very useful legislative website. Follow committee agenda postings and track the progress of any bill.

Note on appropriations: This summary and later updates do not contain tracking or notations regarding legislative appropriations or riders for any of the issues or bills referenced. The general appropriations bills in the House and Senate are works-in-progress during the early weeks of the regular session and can be monitored through the Legislative Budget Board, www.lbb.state.tx.us .

Analysis and commentary below focus on protecting your right to do good works through community service in nonprofit organizations or voluntary associations.

“Final 30 days” review of proposed legislation:

The following bills are pending in the 2017 legislature and affect nonprofits, state associations and foundations in the subject areas listed. * Bills that are “moving” along are listed first. “Companion” bills (one in each house) that are identical or carry the same essential terms may be moving at the same time.

Open meetings / open records issues:

SB 408 (=HB 793**): The somewhat obscure language of SB 408 could require thousands of nonprofits and associations to comply with “open records” disclosure to any requestor by declaring them a government body because the organization (1) receives or spends public funds, unless the funds are received through an arms-length contract for services, (2) uses real or personal property owned or leased by the state or a political subdivision that is not generally available to the public under an agreement that provides for no or nominal consideration, or (3) receives or spends public funds under an agreement to provide services traditionally provided by a government body. The goal of the bill is to reverse the Texas Supreme Court’s ruling in the Greater Houston Partnership v. Paxton case. It is unclear how thousands of small Texas nonprofits without full-time or professional staff and counsel could or would comply with the strict mandates, timelines and penalties for failure to comply with an open records request under the Texas Public Information Act. The affected organizations should also feel uncomfortable being labeled a government body.

Status: Passed Senate; awaiting House committee hearing

HB 2674: A tax-exempt nonprofit corporation that receives 25 percent or more of its income from state funding would be required to prepare a report listing the salaries of each of its employees and officers and have it posted regularly on its website and a website maintained by the Secretary of State.

Heard in House committee May 1, left pending

HB 4144: Would establish a process to determine if an entity receiving an open records request is a government body within the meaning of the Texas Public Information Act and thereby subject to disclosure requests from the public.

Fundraising activities of nonprofit organizations:

HB 3125 (=SB 1337 - HB 1405): This bill adds more professional sports associations (soccer, hockey, minor league baseball, NASCAR, IndyCar) to the current list of parties with a special exemption from state charitable raffle limitations. Occupations Code §2004.002(2) already provides a special status for fundraising by major league sports teams and permits professional sports clubs—from the NFL, NBA, MLB, MLS—that maintain §501(c)(3) tax-exempt charitable foundations to conduct raffles at every home game in their venues to benefit their charitable purposes through a captive foundation. Related: SJR 49, the constitutional amendment that voters will have to approve to enact these provisions.

Awaits House vote

HB 2764: Like SB 1337 above, this bill adds NASCAR, IndyCar and other motorsports racing associations to the raffle exemption list in §2004.002(2).

HB 115: The maximum value of a residence used as a charitable raffle prize would be increased from $250,000 to $2 million.

Passed House; awaits Senate committee hearing

HB 4042: Would extend TABC permits for a temporary charitable auction permit to include the registered campaigns of persons seeking or holding public office that report activities and fundraising under Chapter 254, Elections Code.

Passed House; awaits Senate committee hearing

HB 1100: A charity hunt permit could be obtained from the Parks and Wildlife Department to conduct a charity hunt on private property to benefit a designated nonprofit organization if occurring within two weeks after the end of the open hunting season.

HB 3344 (=SB 1832): A temporary charitable festival permit could be issued by the Texas Alcoholic Beverage Commission (TABC) for on-premises or off-premises alcohol consumption at an auction that is part of a festival, subject to existing local option elections regarding the sale of alcoholic beverages.

SB 1518 (=HB 2827): Amends the Bus. Org. Code (BOC) to expressly incorporate Chapter 252 nonprofit associations into the merger and conversion procedures of BOC Chapter 10. The bill also amends BOC §22.227 to require that a director’s abstention from an official action must be entered into the corporation’s official records, just like an affirmation or dissent.

SB 1518 passed Senate; HB 2827 set for House vote

Related: HB 3488: A for-profit corporation could elect to convert to a public benefit corporation (PBC), which is a for-profit enterprise but one that balances (1) the shareholders’ pecuniary interests, (2) the best interests of those persons materially affected by the corporation’s conduct, and (3) the public benefit specified in its certificate of formation. Duties of the directors align with these three interests. NOTE: “PBC” corporations, already common in other states, can evolve to appear to be nonprofit, charitable enterprises.

HB 2764: Like SB 1337 above, this bill adds NASCAR, IndyCar and other motorsports racing associations to the raffle exemption list in §2004.002(2).

HB 115: The maximum value of a residence used as a charitable raffle prize would be increased from $250,000 to $2 million.

Passed House; awaits Senate committee hearing

HB 4042: Would extend TABC permits for a temporary charitable auction permit to include the registered campaigns of persons seeking or holding public office that report activities and fundraising under Chapter 254, Elections Code.

Passed House; awaits Senate committee hearing

HB 1100: A charity hunt permit could be obtained from the Parks and Wildlife Department to conduct a charity hunt on private property to benefit a designated nonprofit organization if occurring within two weeks after the end of the open hunting season.

HB 3344 (=SB 1832): A temporary charitable festival permit could be issued by the Texas Alcoholic Beverage Commission (TABC) for on-premises or off-premises alcohol consumption at an auction that is part of a festival, subject to existing local option elections regarding the sale of alcoholic beverages.

SB 1518 (=HB 2827): Amends the Bus. Org. Code (BOC) to expressly incorporate Chapter 252 nonprofit associations into the merger and conversion procedures of BOC Chapter 10. The bill also amends BOC §22.227 to require that a director’s abstention from an official action must be entered into the corporation’s official records, just like an affirmation or dissent.

SB 1518 passed Senate; HB 2827 set for House vote

Related: HB 3488: A for-profit corporation could elect to convert to a public benefit corporation (PBC), which is a for-profit enterprise but one that balances (1) the shareholders’ pecuniary interests, (2) the best interests of those persons materially affected by the corporation’s conduct, and (3) the public benefit specified in its certificate of formation. Duties of the directors align with these three interests. NOTE: “PBC” corporations, already common in other states, can evolve to appear to be nonprofit, charitable enterprises.